1. Inflation targeting is becoming the monetary policy framework of choice in a growing number of emerging market and developing countries. This paper examines the experience of non-industrial inflation targeting countries to review the implications for the Fund’s approach to surveillance, technical assistance, and the design of conditionality in Fund-supported programs. For this examination, the paper uses macroeconomic data, technical assistance reports, and a new survey of central banks in selected emerging markets | INTERNATIONAL MONETARY FUND Inflation Targeting and the IMF Prepared by Monetary and Financial Systems Department Policy and Development Review Department and Research Department1 Approved by Mark Allen Ulrich Baumgartner and Raghuram Rajan March 16 2006 Executive I. II. The Ongoing Shift Toward Inflation III. Inflation Targeting and Macroeconomic A. Macroeconomic Performance Under Alternative Monetary Policy B. Inflation Targeting and IV. Adopting Inflation Targeting in Emerging Market and Developing A. Are Developing Countries Good Candidates for Inflation Targeting .17 B. Adapting Inflation Targeting to Non-industrial V. Implications of the Move Toward Inflation Targeting for Fund A. Technical Assistance. 27 B. Fund Surveillance Training and C. Fund-Supported Programs and VI. Conclusions and Issues for Boxes 1. Inflation Targeting in the 2. Fund Conditionality Under Inflation Targeting Tables 1. Infl ati on 2. Prospective Candidates for Inflation 3. Gains Losses from Different 4. Crisis Resilience Under Different 1 The main authors of this paper are Nicoletta Batini Peter Breuer Kalpana Kochhar and Scott Roger. - 2 - 5. Inflation Outcomes Relative to Figures 1. Evolution of Monetary Policy Regimes 1985-2005 .6 2. Regime 3. Macroeconomic Variability Under Alternative Monetary Policy 4. Comparison of Volatility in International Reserves and Interest Rates in Inflation Targeting and Non-Inflation Targeting 5. Comparison Between Current and Prospective Inflation 6. Topics Covered in Technical Assistance Reports on Inflation Appendices 1. Macroeconomic Performance Under Three Monetary Policy 2. Details on Econometric Specifications and on Data from the Survey of
